What is a Quota?

A quota, often referred to as a sales quota, refers to a specific number of sales or amount of revenue that a sales team is expected to generate within a set period. Quotas are determined by upper management and are given to both individual sales reps (personal quotas) and entire teams (group quotas).

Sales Quotas vs. Sales Goals

The terms “sales quotas” and “sales goals” are commonly used by sales teams, so it’s important to understand the difference. Sales quotas are typically smaller milestones that help achieve larger sales goals.

For example, a sales team may have a goal to increase revenue by 10% each quarter. Their monthly quotas would then be established to achieve their long-term goal. A smaller revenue increase of 3.5% each month would result in a 10% increase over the course of the entire quarter.

Sales reps should always know what their sales quotas are and how they help achieve larger goals that impact their individual performance, as well as their larger team and the company as a whole.

Why Are Sales Quotas Important?

As mentioned above, sales quotas help achieve larger, long-term goals. They’re also used to help forecast revenue. If a sales rep is expected to generate a certain amount of revenue, it will be accounted for in a sales forecast.

Sales quotas are also used to incentivize individual performance. Achieving a quota is typically tied to a sales rep’s on-target earnings. They’re guaranteed a certain amount of income as a base salary but achieving quotas results in additional commission earnings as well.

If a sales rep wants to max out their earned commissions, they will do everything within their power to achieve their quotas.

Types of Quotas Sales Teams Use

There are different types of quotas that sales managers can set for their teams. The types of quotas used will depend on a company’s specific goals and overall business model.

Revenue Quota

Revenue quotas focus specifically on generating gross revenue. These are easy to measure: each sales rep on a team is expected to bring in a set amount of revenue. Strategies for achieving this can be more flexible.

If a sales rep is expected to generate $5,000 per month, for example, they can aim to close numerous small sales (50 separate $100 deals) or focus on less sales that generate more revenue (five separate $1,000 deals).

Profit Quota

Profit quotas are like revenue quotas in that they’re focused on dollar amounts, but there is a key difference: profit quotas specifically look at gross profit, so the cost of the products sold is subtracted from the overall revenue.

Volume Quota

Volume quotas focus specifically on the amount of goods sold. A sales rep may be responsible for selling 100 new subscriptions in a given month. The amount of revenue generated isn’t typically accounted for. Instead, the number of sales made is the focus.

Activity Quotas

Activity quotas are often used by business development representatives or sales development representatives. Instead of focusing on generating specific amounts of revenue, they are focused on completing a certain number of actions.

For example, they’d have to measure the number of follow-ups they do, number of cold calls completed, or sales demos given. These activities they complete help secure sales further down the pipeline.